Developers confidence is high in key British cities, crane index shows
Confidence among developers is strong across regional cities in the UK with a sustained levels of homes, offices, hotels, retail, education and student housing delivered in 2018, a new survey shows.
Overall construction activity hit record levels last year, led by activity in Belfast, Birmingham, Leeds and Manchester, according to the latest crane survey from Deloitte.
In Belfast there were 34 schemes under construction in the city centre with 21 schemes completed in 2018 and nine set for completion this year. The report says it was a healthy year for office development as work began on over 400,000 square feet of new Grade A space, which the survey said is making good progress against the Belfast Agenda target of 1.5 million square feet of new space by 2021.
Birmingham saw 23 new starts, with residential leading the way as 13 new schemes were started, bringing the development pipeline to over 5,000 units under construction. Last year also saw the delivery of the most residential units to the city centre, the highest since the Birmingham crane surveys started in 2002.
However, new office development in the city is down from a peak of seven new starts in 2016, to just two new schemes but the report points out that total office volume under construction remains high at 1.4 million square feet and 2019 is set to be a record breaking year for office completions.
Leeds has recorded the highest level of construction in the city centre since the Leeds crane survey began in 2002, with 21 new construction starts in 2018. This includes seven new office schemes adding to the record 844,986 square feet of office development pipeline.
Residential development continued an upward trajectory with three new starts, set to deliver a further 533 units to the city, bringing the total to 2,119 units currently under construction. The report pointed out that five of the developments under construction are Build to Rent, which will be the city’s first purpose built units in this sector.
Residential is driving the growth in Manchester with record levels of development activity. A total of 14,480 residential units are under construction, double that of two years ago. Last year 2,569 units were delivered to market, the highest level in 12 years and Manchester’s development pipeline suggests 2020 as delivering the most homes in nearly 20 years.
Manchester’s office sector has over two million square feet of office space under construction across 13 schemes which Deloitte describes as ‘a remarkable increase’ on the consistent levels of 1.5 million square feet between 2015 and 2017.
‘To have construction figures this healthy is somewhat of a surprise given a myriad of market uncertainties. Developer confidence is a key indicator for economic health and to have this many significant construction starts over the last 12 months, especially in speculative office schemes, is testament to the resilience of the regions and appetite for growth,’ said Simon Bedford, partner and regional head at Deloitte Real Estate.
He explained that if Manchester had featured in the recently published North American crane index, it would have ranked number two behind Toronto but in front of Seattle, Los Angeles and Chicago. ‘That might have seemed like a remarkable statistic a few years ago given Manchester only had one crane in the sky in 2011, but today the figure is a massive 78 sites under construction,’ he said.
Overall he said that investor confidence is thriving, as the rise in office pre-let deals clearly demonstrates. With creative, media and tech occupiers leading some of the major office deals in 2018, twinned with growing diversity in talent, these are good foundations for regional growth in the years to come.
However, looking ahead there may be challenges. ‘Each of these featured cities have ambitious plans which, if they are to emerge, will need to be supported by investment in essential infrastructure which is currently struggling to keep up with the pace of real estate development. The next decade may well be all about transport and smarter city solutions,’ he added.